New York City Mayor Bill de Blasio leaves a meeting with HUD Secretary Ben Carson in December. The federal housing authority has threatened a takeover of the troubled New York City Housing Authority.Mark Lennihan/AP

In a blow to Bill de Blasio, HUD has appointed a federal monitor to oversee New York City’s housing authority. But the city avoided its worst-case scenario.

Ben Carson, the nation’s housing secretary, announced a sweeping plan to appoint a federal monitor to oversee the New York City Housing Authority, the nation’s largest public housing agency. While the deal places the organization under the direct supervision of the U.S. Department of Housing and Urban Development, it falls short of a full federal seizure—a last resort dreaded by the city.

The decision came as a blow to New York Mayor Bill de Blasio’s efforts to lead on the issue of affordable housing. But the city’s worst fears—that the public housing authority responsible for some 400,000 vulnerable New Yorkers would fall under the direct control of HUD—were averted.

Details of the deal resolution were provided to CityLab by a source familiar with the eleventh-hour negotiations between New York officials and HUD, then largely corroborated by HUD Secretary Ben Carson in a press conference.

New York’s housing authority faces a staggering $32 billion in capital repairs to fix dilapidated housing conditions affecting more than 400,000 public housing residents. Carson announced in December that he would find NYCHA in “substantial default” if city authorities could not come up with a plan to reverse the ship by the end of January.

Under the new dispensation, New York’s housing authority will have to meet aggressive new benchmarks for the safety and performance of its aging and dilapidated stock. For example, all heating outages in New York public housing will need to be restored within six hours, according to the source.

HUD will appoint the monitor over NYCHA, and this official will report to federal housing authorities, not to the city. Stanley Brezenoff, the current interim chair of NYCHA, will step down. Mayor de Blasio will appoint his replacement, but the candidate will have to earn approval from HUD. Further, the city will be required to spend $2.2 billion in new repairs over 10 years. The new mandates come with no additional federal resources: In fact, the city will even be responsible for paying the federal monitor.

One figure’s name has been floated as a potential appointment to be HUD’s monitor for NYCHA: Bart Schwartz, former chief of the criminal division in the Southern District of New York (SDNY) under then–U.S. Attorney Rudy Giuliani. Schwartz led the state’s investigation into a billion-dollar boondoggle known as the Buffalo Billion that has dogged New York Governor Andrew Cuomo. (Reached by phone, Schwartz declined to comment. Secretary Carson said on Thursday that an appointee would be named in the coming weeks.)

As a result of the deal between the city, HUD, and the U.S. Attorney for the Southern District of New York, federal prosecutors will drop their charges against NYCHA over gross mismanagement of housing for hundreds of thousands of vulnerable renters.

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Last year, the city agreed to settle rather than face trial, promising to submit to an appointed monitor over NYCHA and spend an immediate $1.2 billion on repairs for some 176,000 apartments. But in November, federal judge William H. Pauley III rejected the settlement outright, ordering the parties—NYCHA and the region’s U.S. Attorney—to come to better terms and submit a joint report by December 14. When that day arrived, HUD issued its own directive to NYCHA, giving the city until January 31 to stave off federal intervention.

New York City officials strongly resisted the possibility of federal receivership, a last resort to restore NYCHA’s ailing fortunes. In the run-up to Pauley’s surprise judgment, the De Blasio administration pitched a plan to privatize the management of tens of thousands of failing public housing units. The emergency scheme from NYCHA even suggested selling air rights or market-rate leases on its unused land in hopes of generating some $15 billion for desperately needed repairs. But the court’s verdict opened the door to more dramatic federal action.

How a federal department proposing huge cutbacks to its own budget could take over NYCHA, which manages a portfolio larger than that of the next 11 largest housing agencies combined, is a question as vexing as the status quo. Housing advocates feared that a judicial receivership, on the other hand, could place vulnerable public housing residents in jeopardy of eviction, as any court-appointed authority would have broad discretion over NYCHA’s contracts and properties.

As the nation’s housing secretary, Carson has consistently come out in favor of deep budget cuts to his agency, especially when it comes to public housing. White House budget plans have called for stark reductions to HUD’s public housing operating fund and for zeroing out the public housing capital fund entirely, among other draconian cuts.

While the final resolution between HUD and NYCHA is closer to the terms originally outlined by the city than the mandate from the court, the resolution is not subject to court approval. It builds a framework for accountability, but it only flicks at the deep-rooted problems within New York’s public housing system.

More visionary thinking will still be required going forward. A recent pilot program to transition six Section 8 developments under NYCHA to management by a public-private partnership has shown some promising results, according to an evaluation by the Citizens Housing & Planning Council. Such efforts broadly fit within the auspices of HUD’s Rental Assistance Demonstration program, which Carson has singled out for praise before. But public housing faces steeper challenges than subsidized voucher housing through Section 8, especially in New York, home to the nation’s largest and oldest tracts of public housing.

“NYCHA has had serious management issues over the years, and those must be addressed, said Diane Yentel, president and CEO of the National Low Income Housing Coalition. “But the fundamental challenge that NYCHA faces is lack of funding for urgently needed repairs. A federal monitor, selected and appointed by HUD and who reports directly to HUD, together with a new NYCHA Chair approved by HUD, is just one step away from administrative receivership and all of its potentially disastrous outcomes.”

Carson’s decision comes in the wake of the departure of Pam Patenaude, HUD’s deputy secretary and an experienced housing official widely regarded as a steadying hand at the department. Patenaude left HUD amid disagreements with the Trump administration over civil-rights housing policy and disaster recovery funds for Puerto Rico, according to The Washington Post.

De Blasio met with Carson in December and again in January, but those meetings proved inconclusive. A spokesperson for the Citizens Budget Commission, a nonpartisan watchdog, said, “I’m not sure they’ve been talking about much of anything.”

The debate over the future of NYCHA reached a new pitch on Wednesday night, when Lynne Patton, a HUD official and former Eric Trump aide (and wedding planner) appointed in 2017 to oversee New York and New Jersey, previewed a “huge & historic announcement” by Carson. Her tweet came with a barb for Mayor Bill de Blasio: “whether or not this announcement will be great news for the @NYCMayor remains to be seen.”

City and HUD officials were still meeting when Patton sent the tweet hinting at an adverse resolution for de Blasio, which housing advocates read as a receivership. Patton’s dispatch drew an immediate reply from New York City Council Speaker Corey Johnson, a leading mayoral hopeful, who took to Twitter to denounce her message as a “ratings ploy.” He tweeted, “This isn’t TheApprentice [sic] or a wedding announcement!”

The public spat ended with a Justin Bieber gif. “The only announcement about NYCHA should be a real financial commitment,” Scott Stringer, the New York City comptroller, tweeted on Wednesday night. “Anything less than that is total bulls**t.”

One way or another, hellish conditions in New York public housing, recorded recently in feature investigations as well as in residents’ tearful testimonials before the court, demand an answer. For better or worse, Chicago demolished Cabrini-Green and St. Louis razed Pruitt-Igoe—two of the nation’s most notorious housing projects—decades ago. New York’s housing projects have been left to languish under many more years of deferred maintenance and declining federal support. That bill is now past due.